Strategy for building the Best Online B2B Marketplace: Challenges and Opportunities
Online B2B marketplaces are up and coming, and that is an undeniable truth. While only 11% of B2B businesses had a marketplace in 2019, this number is growing rapidly. Before the pandemic, payments research firm iBe TSD already predicted B2B marketplaces to generate $3.6 trillion in sales by 2024. With the pandemic driving digitisation for survival, this number is likely to be an extreme underestimation. This is a view shared by many, as Divante’s survey last year showed that 52% of survey respondents, who were business executives, predicted marketplaces to be the most significant area of B2B growth in 2021.
Despite all hype that Online B2B marketplaces are the next profitable venture, we should also err on the side of caution. One must not dive into creating a B2B marketplace simply because of hearsay. The challenges of creating and maintaining a B2B marketplace should be studied and understood, otherwise, they risk turning into pitfalls that can turn potential profit into hard losses. Nevertheless, challenges often bring along opportunity, and the challenges of creating B2B marketplaces do not differ on this rule. This article hence seeks to identify potential challenges that aspiring B2B marketplace owners may face and provide recommendations on exploiting these challenges, turning them into opportunities for adopting winning strategies.
Challenge 1: The Chicken-and-Egg Problem
Before creating any marketplace, an entrepreneur or firm would ideally own one side of the equation - that is having either a ready pool of buyers or sellers. However, to have a ready pool of buyers, there will need to be a demand for buyers, which can only happen if there already are sellers. This results in a chicken-and-egg issue of whether to build demand or supply first. While it is possible to resolve this dilemma by growing both buyer and seller bases at once, it certainly would not be an economical solution. On the other hand, to build a marketplace without a buyer and seller base is a sure way to fail.
While this challenge can be a frustrating one to handle, there are several ways about resolving it. The first method is to find out which side of the equation is harder to build and build it first. Some marketplaces may find it harder to build their supplier base due to the nature of their marketed products, while others may experience the opposite. This can be gleaned by preliminary research or testing out the sales and onboarding process. Typically, once that side is established, it will be many times easier to achieve a sizable community on the other end. Take for instance Outdoorsy, which is an RV rental marketplace. Understanding that getting RV owners to rent out their RVs is the tougher side of the equation, they made the effort to first convince RV owners, and then the consumer base followed easily. The rest is history.
Secondly, you could find one big client to anchor the marketplace initially to stimulate the demand or supply. For instance, Candex marketplace first sought Siemens, a conglomerate, as their customer, who brought in its supply vendors into the Candex marketplace. This method however is difficult with limited business connections. That brings us to the third method.
Remember that in a B2B marketplace, the target audience is typically business executives, compared to regular consumers in a B2C marketplace. Hence, the solution is to think corporate. To address the lack of connections issue, networking sessions such as webinars can be organised for prospective buyers and sellers to connect. This also resolves the chicken-and-egg dilemma, as both sides are assured that significant demand exists. Statistically, 78% of B2B buyers indicated that webinars aid them in making B2B purchases. With a big dilemma resolved, there is one less burden for the budding entrepreneur.
Challenge 2: Understanding and Facilitating the B2B Purchasing Process
Before creating your B2B marketplace, it is imperative to realise the differences in purchasing models under a B2C and a B2B marketplace. In a B2C marketplace, the consumer simply needs to identify the item or service they want to purchase. However, in a B2B marketplace, buyers need to compare and contrast many products and obtain multiple quotes before they may proceed with the purchase. In fact, a report from Google shows that on average, B2B buyers complete 12 searches before they make a purchase decision. To compound the problem, in B2B transactions, there are typically a group of people tasked to make purchasing decisions. Given the different aspects that different people may value e.g price, quality, product origin, it can be an extremely tedious process to come to a conclusion.
The above factors will no doubt slow down the B2B transaction process significantly, and this would mean a lower transaction volume compared to a B2C marketplace. This could also translate into lower revenue if your marketplace runs on a commission-based structure.
While the nature of B2B purchases is immutable, what a B2B marketplace can do is to add features that facilitate the purchase process, entrenching loyalty to the marketplace and reducing unnecessary wait times. The first suggested feature is to allow customers to compare the specifications and prices of the different products side by side. This would allow access to all information required for purchase at one glance, instead of needing to constantly toggle between the various pages of the different listings. This could take the form of phone comparison in GSMArena for instance.
Gartner research found that customers were 2.8 times more likely to experience a high degree of purchase ease if they perceived the information they received from suppliers to be helpful. Hence, the second and arguably more important feature is to create custom fields that sellers need to fill in, which may help buyers make their decisions. What then should these custom fields comprise? According to Forbes, B2B purchasers indicated the top features that aided their purchasing decisions including white papers, case studies, e-books, infographics, and blog posts. These could be made into upload fields for suppliers on a B2B marketplace to upload, so as to aid their buyers in purchase decisions. Ultimately, the ease of purchase will definitely lead to a positive impact on marketplace revenue.
Challenge 3: The Need to Go Mobile
Mobile usage is on the rise throughout the world. Techjury found that 51% of time spent online in the US is spent on mobile devices. This mirrors the global trend, whereby a significant 40% of people in the world today conduct their online searches solely on their smartphones. CNBC even predicts that 72.6% of internet users will access the web solely via their smartphones by 2025. The B2B eCommerce world is no stranger to these trends. Already in 2015, 42% of B2B procurement researchers used a mobile device during the purchasing process. In 2020, it was found that 50% of B2B inquiries were made on mobile. Hence, B2B marketplaces stand to lose out if they do not support mobile usage.
While it is a challenge to develop mobile capabilities, there is much to be gained from doing so. B2B marketplaces that are mobile-friendly stand to get an edge over their competitors in the near future. In other words, developing a seamless mobile User Experience (UX) for B2B marketplaces is vital. The most straightforward solution is to develop a native mobile application, as what B2B marketplace Alibaba and Grainger have done. Alibaba’s mobile app greatly resembles a B2C marketplace, which provides ease of usage. They even allow for customisation requests and approval of suppliers’ offers within the app itself. However, native mobile apps are costly, and may not be feasible for B2B marketplace startups. A low estimate already amounts to $130,000, and this does not include the cost of time: development for months on end.
Features that have appeal can also be incorporated as differentiators amidst the boom of B2B marketplaces. Features such as neumorphism and asymmetrical layouts, which are increasingly demanded can be considered. This can also include new technologies, such as Augmented Reality (AR), which B2C businesses such as IKEA and Etsy are already utilising.
Challenge 4: Establishing Trust
Compared to B2C marketplaces, amounts transacted on a B2B marketplace can be staggering, especially when purchasing items in bulk. As a result, trust becomes an important factor in the marketplace. Buyers will question if the suppliers of the marketplace can be trusted. Similarly, sellers will need to know if buyers are credible enough to stick to an agreed transaction. A B2B marketplace owner then faces the challenge of incorporating trust mechanisms into the marketplace.
There are a few ways to establish trust. The first is the incorporation of a review and rating system in your marketplace. This would establish credible buyers and sellers in the marketplace, and weed out those who consistently obtain bad reviews. To further quell the fears of your vendors and consumers, marketplace owners may also choose to put in place an arbitration center should there be a dispute regarding an order.
A second way to establish trust is to use the marketplace name even when buyers are dealing with third-party vendors on the marketplace. This is best illustrated with the example of Laserhub, a marketplace for sheet metal that automatically connects the buyer to the most appropriate supplier. Despite a large number of suppliers on the platform, the buyer always feels like he or she is only interacting with Laserhub, which creates a sense of trust.
Finally, the use of Blockchain, or the immutable ledger chain, has become synonymous with trust. Blockchain has thus seen widespread adoption in the areas of supply chain management and trade finance, where transparency is enhanced and fraudulent practices can be prevented. It has already been adopted in the eCommerce sites of Walmart and Unilever. By using Blockchain, the authenticity of the goods transacted can also be established, adding another layer of trust.
Building a B2B marketplace can seem daunting, with so many challenges that need to be overcome. This roadmap is not meant to be a definitive guide, as you may face other challenges, or come up with other solutions of your own. It should serve, however, as a reminder to all, that challenges are only one side of the coin. On the flip side, they are opportunities waiting to be capitalised on. So perhaps it is time to stop hesitating and venture forth into the brave new world of B2B marketplaces.